Results 1 to 6 of 6

Thread: Some financial news over the weekend

  1. #1
    Veteran Member person's Avatar
    Joined
    Sep 2007
    Posts
    633
    Thanks
    33
    Thanked 34 Times in 23 Posts

    Default Some financial news over the weekend

    The end of "ignorance" arbitrage? Seems like plain old selling volatility to me
    These companies attempted to undercut the market pricing of risk - charging clients consistantly less than what Mr. Market would, and pocketing the difference, all the while doing so with 100x plus leverage against products with sparse or unkowon loss histories. It was bound to hit the wall. In a few hours, I'm probably going to release some research that shows how regional banks have backed themselves up against the failure wall using 7x to 20x leverage, so just imagine 100x plus leverage...
    http://reggiemiddleton.bankimplode.c...nd-game-nears/

    Worst Economic Advisor Ever. Who was it again that totally and utterly destroyed HP and Compaq?
    Yale prof about McCain's new economics advisor: "You couldn't pick a worse, non-imprisoned C.E.O. to be your standard-bearer."
    http://www.nytimes.com/2008/06/06/us...D0ZUWj3zk2TKRg

    More fun with (peak?) oil

    -Update 2:28PM: oil now up over $11-
    Oil is near $139 a barrel as I write this, a record high even after accounting for inflation.
    http://optionarmageddon.ml-implode.c...-so-far-today/

    Shura member calls for oil production curbs in Saudi Arabia.
    "The level of oil production in Saudi Arabia must be linked to the country's actual development and financial needs not to market prices and the need of foreign consumer. It is not wise to sap this resource just to satisfy the demand of foreign markets."
    Dateline June 28th 2000 - The 2000 presidential campaign
    Bush Would Use Power of Persuasion to Raise Oil Supply
    http://globaleconomicanalysis.blogsp...rsonality.html

    Oil's Biggest Day yet Drags Down Stocks
    Oil prices make biggest single-day leap; Dow Jones tumbles nearly 400 points
    http://abcnews.go.com/Business/Econo...ory?id=5010997

    At $3 a gallon, Americans just grin and bear it, suck it up and, while complaining profusely, keep driving like crazy.
    At $4, it is a world transformed. Americans become rational creatures.
    http://www.washingtonpost.com/wp-dyn...060503434.html
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

  2. #2
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Some financial news over the weekend

    A - don't worry, with Obama's clinching of the nomination it would appear that we're going to wind up with Mr. Krauthammer's energy tax being imposed ... but it's likely to be done stealthily via a carbon tax 'cap and trade' system



    (snip)"Interesting confluence of events: Barack Obama is about to wrap up the Democratic Presidential nomination and the Senate has begun debating a major plan to cap carbon emissions—an idea Obama strongly supports.

    What makes this coincidence so fascinating is that the emissions bill, known in Washingtonese as "cap and trade," has the potential to be a fiscal life preserver for the Illinois Senator. While the actual dollars will, of course, depend on the details of Obama’s plan, the proposal on the Senate floor is expected to produce an eye-popping $3.3 trillion in new revenues over the next four decades. To do the math, that about $85 billion-a-year.

    While that bill has almost no chance of passing in 2008, its supporters frankly call it a "dress rehearsal" for the real deal. Both Obama and John McCain support a "cap and trade" plan, although McCain’s version would generate much less revenue for Washington.

    For Obama, however, "cap and trade" could be a way to help pay for a big chunk of his extremely ambitious—and hugely expensive—policy agenda. Massive health reform, more low-income housing, beefed-up homeland security, alternative energy research, and tax cuts for seniors and working families, just for starters. And he has not come close to telling voters how he’d pay for it all.

    Could cap and trade, which is really a massive energy tax increase in drag, bail out Obama’s fiscal policy? It might.

    For now, all we know is that he’d spend about $150 billion of the revenue windfall on clean energy initiatives over 10 years and an unspecified additional amount on related environmental efforts. He’d probably also use a chunk to subsidize low-income energy consumers. But there would still be plenty of cash left over.

    The fate of that dough will be the subject of a big-ticket lobbying campaign over the next few years. Nothing is more fun than watching pols fight over how to redistribute hundreds of billions of dollars."(snip)


    B - I wouldn't worry about national bank failures, because it appears that the US Fed is ready and willing to accept any kind of junk securities these banks wish to offer up as collateral for freshly printed greenback loans. The US Fed also appears committed to maintaining a very low 'cost of money' to the national banks i.e. fed funds rate, which in turn provides the national banks a fat profit margin spread versus the interest rates they are able to charge for new loans they write. Of course, the fact that this US Fed policy is also trashing the dollar's exchange rate and as a result racking up record high oil / food / commodity / imported goods prices appears to be of little concern ! And as long as the US Fed continues its 'emergency measure' of allowing investment houses the same access to Fed window loans as national banks, you don't need to worry about them failing either. Of course, somewhere along the way, it's likely that the US taxpayer will wind up holding the bag for 1/2 trillion worth of 'toilet paper' which the US Fed accepted as collateral.

  3. #3
    Veteran Member person's Avatar
    Joined
    Sep 2007
    Posts
    633
    Thanks
    33
    Thanked 34 Times in 23 Posts

    Default Re: Some financial news over the weekend

    Quote Originally Posted by Melonie View Post
    A - don't worry, with Obama's clinching of the nomination it would appear that we're going to wind up with Mr. Krauthammer's energy tax being imposed ... but it's likely to be done stealthily via a carbon tax 'cap and trade' system
    How is this any more stealth than the carbon credit schemes going into place all around the world? It seems pretty transparent to me,unless I'm missing something.
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

  4. #4
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Some financial news over the weekend

    How is this any more stealth than the carbon credit schemes going into place all around the world? It seems pretty transparent to me,unless I'm missing something.
    well, the direct 'carbon tax' which is being imposed in various places around the world ... most notably in Quebec and B.C. for north americans ... at least has a direct association between an amount of gasoline / natgas / diesel fuel / fossil fuel generated electricity etc. and the amount of 'carbon tax' imposed. The degree to which the 'carbon tax' increases the local price of gasoline / natgas / diesel fuel / electricity may not be publicized, but at least you can discover how much it is if you're willing to do some research. This point also holds true for American ethanol subsidy tax (calculating out to 5.6 cents per gallon on 10% ethanol blend gasoline), for the American biodiesel tax, etc.

    However, where the 'cap and trade' system comes into play, there is no longer any direct monetary relationship between the amount of commodity and the amount of carbon tax. Consider for example trying to calculate the embedded carbon tax on a manufactured item like a car. Under the 'cap and trade' system, every manufacturer is going to be assigned some arbitrary government allowance for carbon emissions ... which in this case would encompass not only the car assembly operation, but the fabrication of every subassembly from engines to transmissions to radiators to molded plastics. If and when that arbitaray government allowance for carbon emissions is exceeded, the subassembly manufacturer must then go into the 'carbon credits' market and purchase unused 'carbon credits' from some other business which has received an arbitrary government allowance for carbon emissions that they are not fully utilizing. Thus the additional costs associated with purchasing additional 'carbon credits' will not be tacked on at the point of sale (as they are with gasoline, electricity et al), but will be an additional embedded production cost for each subassembly manufacturer. Thus even if someone tried to put a total dollar cost figure on the 'carbon tax' included in a new car's price, it would require forensic accounting spread over a whole bunch of subassembly manufacturers in order to do so.

    Now try and do the same with a product like, well, tomatoes. In order to find out the actual amount of 'carbon tax' embedded in the future price of a tomato on the grocery store shelf, you'd have to do forensic accounting all the way back to the fertilizer plants, to the farm implement manufacturers, to the trucking companies fuel consumption and finally to the retailers' electricity bills to operate lights and produce coolers !

    From everything that I am reading, the 'cap and trade' idea ... which is apparently supported by both Obama and McCain, totally revolves around the size of the arbitrary government carbon allowance which will be 'granted' to each and every business. Receiving a large allowance means that a business can earn additional profits by downsizing (i.e. selling their unused 'carbon credits'). Receiving a small allowance means that a business will become less and less profitable as they grow (because growth forces them to purchase unused 'carbon credits'). It would also appear that, where America is concerned, it will be necessary for the government to ADD another 100,000 public sector jobs in order to arrive at the size of an appropriate carbon emissions allowance for each and every business, and to monitor and enforce actual carbon versus carbon allowance.

    IMHO there is nothing transparent about the effects of 'cap and trade'. Some political pundits are speculating that the degree to which a 'carbon tax' and 'cap and trade' carbon credits will affect the future US economy, both in terms of costs and in terms of 'strategies' / incentives / disincentives, will be the largest change since FDR's 'New Deal'.

    However, 'cap and trade' carbon credits do appear to share one attribute with the 'carbon tax' already in effect in Quebec and B.C. - in that the structure of the tax / allowances will constitute a de-facto form of energy rationing. On an individual basis, the Canadian 'carbon tax' system includes a 'rebate' feature - which essentially makes the first X units of carbon based energy consumption exempt from the 'carbon tax' but makes additional units of carbon based energy consumption very expensive. The carbon allowance to be granted by the government to each and every business under the proposed 'cap and trade' system essentially accomplishes the same end result - meaning that the first X units of production are exempt from the 'carbon tax' but that additional units of production become very expensive (due to the cost of purchasing additional 'carbon credits' once that business' government regulated carbon emissions allocation has been fully utilized). But again, there seems to be a huge lack of 'transparency' in regard to the actual point where carbon taxes will kick in, and how large of a cost factor they actually will be.

    ~
    Last edited by Melonie; 06-08-2008 at 06:35 AM.

  5. #5
    Veteran Member person's Avatar
    Joined
    Sep 2007
    Posts
    633
    Thanks
    33
    Thanked 34 Times in 23 Posts

    Default Re: Some financial news over the weekend

    Quote Originally Posted by Melonie View Post
    Under the 'cap and trade' system, every manufacturer is going to be assigned some arbitrary government allowance for carbon emissions ... ... Thus even if someone tried to put a total dollar cost figure on the 'carbon tax' included in a new car's price, it would require forensic accounting spread over a whole bunch of subassembly manufacturers in order to do so.
    Quote Originally Posted by Melonie View Post
    Receiving a large allowance means that a business can earn additional profits by downsizing (i.e. selling their unused 'carbon credits'). Receiving a small allowance means that a business will become less and less profitable as they grow (because growth forces them to purchase unused 'carbon credits').
    My impression was that, globally, carbon cap allowances were to be tied to per-country greenhouse gas emissions targets. The handwavy idea is that pollution costs the economy so polluters shouldn't have a free externality as they do now. But if this is going to be achieved somewhat randomly on a per business basis, that's bad IMHO. I would hope that it is done so that any non-poluting business has the same marginal costs as an "equivalent" poluting business. Otherwise, as you say, it's unfair.

    The "forensics" shouldn't be too complicated, I imagine. You'll have some futures trading to hedge risk and some spot carbon credit trading, just like with other commodities. Granted, a consumer won't be able to go "I am paying $1.25 carbon cost on this particular product", but the overall level of pollution and the expected future level of pollution isn't a constant thing so I wouldn't expect you could hope to do that. Like, you can't easily tell how much the spot/futures price of wheat affects your burger at the point of sale either.
    Once again, the conservative, sandwich-heavy portfolio pays off for the hungry investor
    - Dr John Zoidberg

  6. #6
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: Some financial news over the weekend

    Like, you can't easily tell how much the spot/futures price of wheat affects your burger at the point of sale either.
    true, but this also produces a very non-transparent result. Very few Americans connected the dots re ethanol policy / subsidies 'trickling up' to produce steep price increases for wheat / cattle feed / beef / milk / cheese as a supposedly unintended consequence (i.e. all components of the burger you mention). Fortunately alternative media has picked up the ball on this issue, but there is no guarantee they'll also be able to do this accurately with the supposedly unintended consequences of a 'carbon tax'.

Similar Threads

  1. Replies: 0
    Last Post: 05-22-2011, 06:47 AM
  2. Comments [ rosy spin on every financial news story ]
    By arctic717 in forum Dollar Den
    Replies: 12
    Last Post: 06-04-2009, 01:16 PM
  3. 'hilarious' financial news ...
    By Melonie in forum Member Boards
    Replies: 4
    Last Post: 07-18-2008, 07:36 PM
  4. Replies: 0
    Last Post: 11-02-2007, 05:18 AM
  5. the scariest financial news heard this week ...
    By Melonie in forum Dollar Den
    Replies: 11
    Last Post: 04-30-2006, 06:14 AM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •